The true nature of "money" discovered by humanity: From the birth of currency to crypto assets

Have you ever seen a giant stone currency carried by a primitive man in a manga or something? That currency actually exists. It is located on Yap Island in the Federated States of Micronesia. Even in the 19th century, this island had almost no exchange with the surrounding islands, and the islanders lived in an extremely primitive society.

For this reason, from the end of the 19th century to the beginning of the 20th century, many scholars visited the island to investigate it as a valuable sample to observe primitive human society. What they saw was a giant stone currency called "fey" that seemed impossible to carry.

It ranges in diameter from about 30 cm to nearly 3 m, and the largest ones weigh over 1 ton. The characteristics of fey are that they were specially cut and transported from a distant island, and because they are too heavy, they are not carried like normal currency. Even if this currency was used for buying and selling, it was never handed over to the other party, but was left in front of the house or on the roadside.

Fey were used for large transactions on the island, such as land transactions and wedding dowries. The owner of a fey would declare that he would transfer ownership of his fey to the other party as payment, and the person who received the fey would remember and pass on the fact that the fey had been transferred. This was all it took to complete the transaction.

The price of a fey was determined by its size and the story that was passed down. The reason they were made with stones from outside the island was to give the story a sense of grandeur and rarity. At the time, the wealthiest house on Yap Island did not have a fey, but it was said that this house owned the largest fey on the island.

The fey owned by the house was extremely large, manufactured by their ancestors about three generations ago, but it was said that it sank into the sea during transportation in a storm. Naturally, none of the villagers had ever seen the fey. However, because everyone believed the story that this fey existed, the house became the richest house on the island.

The discovery of the fey cast a shadow over the theory that primitive society was a barter society. In economics up until that point, it was believed that humans practiced barter in primitive societies. However, since barter does not always mean that each party has what the other wants, people began to use precious metals, which are long-lasting and highly coveted, as a medium of exchange.

Everyone learned that this was money. However, money actually existed on the island of Yap, a primitive society that remained until the 19th century. Moreover, one after another, situations were discovered that could not be explained by the conventional theory that "money is not actually handed over," "the value of money is established only by records and memories," and "even families that do not have money can become rich only by trust and stories."

The discovery of Fay once again raised the question of "what is money?" and "how did money come into being."

Yap Island, Federated States of Micronesia

▶ Currently, the US dollar is widely used on Yap, so Fay is not used for transactions.

You may find it hard to believe that something that no one has ever seen and cannot be transferred can be used for transactions, but we are doing something similar to this now. For example, depositing money in a bank. Banks run on interest earned by lending money to others, but the source of capital that banks lend is the deposits we make with them.

Have you ever seen your deposits piled up in a bank as stacks of bills? We are essentially the same as the people of Yap. The difference is that we only record and remember transactions in the form of bankbook balances, not verbally.

Until the mid-20th century, the world was run on an economic system based on the silver and gold standard. This was an illusion that currency could only be issued if the state guaranteed the equivalent amount of gold or silver in physical possession. There was no gold or silver on Yap. All there was was trust in the stories told by others.

The money we use today is issued by the state, so it is trustworthy. Therefore, a "managed currency system" has been adopted, which does not require gold or silver as a guarantee. John Maynard Keynes proposed this managed currency system in the 1920s, and the world only recently moved to a "managed currency system" after 1971.

After the Yap Island example was discovered, anthropologists began to investigate the buying and selling patterns of human beings again in the 20th century. The 20th century was a great boom in human history.

Of course, bad research such as superiority ideology was mixed in, but unlike before, scholars who were able to investigate the world by train and plane came to one conclusion. It seems that there is no evidence that humans have experienced a "barter society." If you think about it calmly, it is a natural conclusion.

When you forget your pen and need to borrow one from your colleague sitting next to you, you don't always have to prepare something to replace it. For now, you might borrow a pen, and later buy the other person a can of coffee saying "thank you".

In primitive societies, where the number of people in a society is small and the relationships are strong, there is no need to resort to bartering. By the way, in this example, we should not overlook the fact that the lender obtains an additional economic value in the form of coffee by simply "lending a pen". This will be explained in detail later, but it is an extremely essential event in exploring the true nature of money.

Anthropologists have concluded that "money does not refer to objects such as coins or paper money, but is a system for recording debts that inevitably arise when making a transaction."

When borrowing and lending between close people, there is no need to go to the trouble of recording each other's debts in detail like the Fay on Yap Island. However, when a village expands in size and becomes a country, it is a different story. Even if they speak the same language, lending and borrowing (transactions) occur between people who are completely unreliable. That is why humans invented the monetary system.

Karl Marx, the German philosopher and economist, said, "The exchange of goods begins where the community ends, where the community comes into contact with another community or with the members of another community." Here is an example.

The Histories written by Herodotus, an ancient Greek historian, records trade between Carthage (a country that was in northern Tunisia today) and black tribes in the interior of Africa.

When the Carthaginian fleet arrived at a trading site in Africa, they first unloaded their cargo on the beach, returned to their ships, and set off a smoke signal. Then, a black tribe emerged from the back of the beach, inspected the goods, and left an amount of gold that they thought was worth the goods, then returned to the depths.

Seeing that the tribes had moved away from the beach, the Carthaginians landed again. They checked the amount of gold, and if they were satisfied, they loaded the gold onto the ships and set sail. If they were not satisfied, they did not accept the gold, but returned to the ships and waited for the amount of gold to increase. Similar trade records are recorded all over the world, and are called "silent trade" because not a single word was exchanged between the two parties.

Economist Shinichiro Kurimoto points out that the essence of silent trade recorded all over the world was not the "silence" that was adopted because of language incommunication, but rather the "avoidance of contact." It is said that contact was feared precisely because the other party was a foreigner who belonged to a different community and could not be trusted.

Why has humanity avoided contact with foreigners so much? A clue can be found in the record for March of the 6th year of the reign of Emperor Saimei (660) in the Japanese history book "Nihon Shoki." In that month, Shogun Abe no Hirafu encountered and fought an armed fleet from a mysterious country called Sushen. On the day before the war, he piled weapons and luxury dyed cloth on the beach to show the Sushen people, and once withdrew his troops.

The Sushen people traded some of the clothes for their own and returned to the ship, but for some reason they returned to the beach again and returned the clothes they had brought home, which is recorded as having led to a battle.

It is because neither side knew the other's culture that conflict would break out if they made contact carelessly. That is why early trade was conducted only to show that they had no intention of fighting. Naturally, in this case, when the goods acquired through trade were brought back, the trade should not be such that either community felt they had gained or lost anything.

Therefore, as in the case of Carthage, the goods were carefully examined and inspected on-site to ensure that neither side made a profit. And in a barter exchange where there was no lending or borrowing, there was no room for the creation of currency.

The oldest kingdom in China that can be confirmed in history is the Shang state of the Yellow River civilization, which bestowed processed cowrie shells as a symbol of the king's authority on the other ethnic groups it absorbed. Cowrie shells are beautiful shells that were popular as ornaments, but they do not live in the waters near China, so they were caught in the South Seas of India and in the waters near Okinawa.

In other words, it was essentially impossible to own cowrie shells in East Asia, so the other ethnic groups under his rule obeyed the Shang king, who generously bestowed rare cowrie shells. The character "shell" is included in the kanji characters for wealth, such as "treasure," "treasure," and "currency," because of this case, but these processed "shell currency" could not be bought or sold.

Because it was only a gift, not a loan, it did not need to function as currency. In the early 17th century, Ogiwara Shigehide, the treasurer of the Edo Shogunate, realized that the value of currency was not in its material value, but in its credibility. He said, "If the nation is trusted by its people, currency should circulate even if it is made from rubble."

Shell currency in ancient China

▶Shell currency bestowed in ancient China. Each piece is carefully processed. These coins have been excavated in large quantities from the coffins of nobles, etc.

Now, let's go back to modern banks. Banks lend the funds they receive from their customers to third parties, but if they lend 1 million yen, they do not deduct the 1 million yen that is lost from the customer's balance. This means that by lending money to a third party, the bank creates a non-existent profit of 1 million yen.

The fictitious economic effect that arises from such lending is called "credit creation." This is possible because the bank is trusted by its customers. Because this is what banks can do, the amount of credit created by nations is much larger.

The first large group of nations built by human beings are called the four great civilizations of the world. However, even in communities of this scale, humans have not yet invented money. Naturally, when it comes to nations, it is not possible to know all the citizens by face, so it is no longer possible to make payments only verbally, as on the island of Yap.

Therefore, humans sought a "means to record debts." A large number of documents used to record debts by humans who did not yet have writing have been excavated from the ruins of Mesopotamian civilization. They are clay figures called "tokens" and clay balls called "bullas."

▶Clay tablet inscribed with cuneiform writing (left) Tokens and bullets used by Mesopotamian civilizations (right)

When borrowing 1 kg of wheat, the borrower would make a "token" in the shape of a wheat bag and hand it over to the lender. Then, they would go to the temple, a symbol of fairness and equality, and in front of the priest and the lender, the "token" would be placed in a "bulla", sealed, and baked. When the repayment date came, both the borrower and the lender would gather at the temple again and repay the debt, including the interest.

Once the debt was properly repaid, the bulla and token would be smashed on the spot, and the debt was paid. This system was eventually applied to the management of taxes collected at the temple. Previously, when a national expenditure occurred, wheat would be moved from warehouse to warehouse, but with tokens, inventory management could be done simply by moving the tokens.

Thus, a bookkeeping system using figures was created. Mesopotamian civilization was by far the most developed of the four great civilizations in terms of agriculture, and it is thought that this was because they had already developed a bookkeeping system for inventory management. In any era, regions that can efficiently select and concentrate their investments will be economically strong.

As the economy grew through selection and concentration, the variety of products and tokens increased. Rather than making clay sculptures to be destroyed one by one, it was decided to designate marks representing the type and number of tokens and carve them directly into clay tablets. We call these symbols "cuneiform."

Cuneiform is an ancient script that has been almost completely deciphered. When deciphering the characters written on clay tablets excavated from the ruins of Mesopotamian civilization, it seems that most of them are records of personal debts, messages of collection, and complaints about non-repayment of money. Humans have been struggling with debts since before the birth of money.

Location of Mesopotamian civilization

▶The Mesopotamian civilization was not a single nation, but rather a group of agricultural nations that developed along the Tigris and Euphrates rivers.

Thus, a system for recording debts and writing were born, but then the next problem arose. For simple everyday payments, should writing be done on a clay tablet, or should one go to a temple or in front of the king?

A certain amount of study is required to master the use of writing. So the state devised a monetary system, including coins. Anything whose value was easily recognized, such as precious metals or grains inspected by the state, could be freely used for lending and borrowing between private citizens belonging to the community.

This is the currency, such as the coins and paper money that we are familiar with. In other words, money was born as a system for quickly recording debts between strangers within the community to which one belonged.

However, as globalization progressed and exchanges between civilizations began, humanity forgot this premise. Even if they were different communities, languages ​​can be learned over time, and mutual understanding progresses.

Then, people realize that ethnic groups that were thought to be completely different civilizations have similar values ​​to their own. The form of primitive trade, which avoided profit in order to interact peacefully with each other, changes.

"Spices are considered worthless in this country, but they are worth twice as much in our country." "Minerals that are in abundance in our country are in short supply in this country."

As mutual understanding progressed, trade changed into trade for profit. At that time, precious metals such as gold and silver were the most common denominators that happened to be considered highly valuable worldwide as ornaments favored by people of high status.

In Japan, until the Heian period, gold was something that aristocrats had to wear to dress up, and had no value as currency at all. However, as globalization progressed, Japan also changed to a monetary system based on gold.

Nevertheless, around the 17th century, the country was run by a floating exchange rate system using three coins: gold, silver, and copper, which was an extremely advanced monetary system by today's standards. However, since gold and silver were necessary for trade with the world, after the Meiji Restoration, the country deliberately changed to a primitive monetary system based on the global gold and silver bimetallic standard.

At the end of the 19th century, silver coins were used around the world as trade settlement currency. But they were not just any silver coins. They were called "trade silver" and were made based on the fineness and weight of the 8 real coin made from silver mined in Mexico.

Mexican 8 real silver coin

▶ From the 16th to 19th centuries, countries around the world made silver coins for trade settlements based on the fineness and size of Mexican silver coins.

The design could be anything, and it didn't matter which country made them. However, the fineness and weight had to be the same. The first 1 yen silver coin made in Japan was modeled after the US 1 dollar silver coin. And the 1 dollar silver coin was a trade silver coin modeled after a Mexican silver coin.

People around the world were under the mistaken impression that currency was not a record of borrowing and lending issued based on the credit of a nation, but rather a measure of silver weight. Of course, this payment method also had its advantages. The value of a 1 real silver coin, a 1 dollar silver coin, and a 1 yen silver coin were all the same no matter where you went in the world, so payments were smooth.

New National Bank Note 1 Yen

▶ Early paper money issued by Japan always had a disclaimer on the face of the note stating, "Anyone who brings this note to a bank will be offered the note in exchange for gold coins."

Now, I think you understand that the essence of money is a record of lending and borrowing backed by the trust of a nation. If that is the case, it is only natural that crypto assets using blockchain, the most advanced recording method in the world, are attracting attention.

However, at the same time, money is also based on the premise that it is issued with the trust of a nation, which is incompatible with Web 3.0. I understand the idea of ​​smart contracts replacing central administrators, but if you compare the distrust of the nation that anarchists have with the trust that ordinary people have in the nation, the latter is still stronger at present.

What is important for crypto assets to become more widespread in the future is to gain trust. First of all, we enthusiasts should pull ourselves together and convey that it is a solid payment system without excessively appealing to profits, and we should eliminate shady operators such as scam coin issuers in the industry.

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